The present invention relates in general to pricing and processing of a credit card account, and in particular to systems and methods for controlling account pricing and processing for an individual cardholder based on cardholder characteristics and behavior.
Credit card issuers, such as banks, retailers, or other financial service providers, provide cardholders with credit card accounts. In a typical credit card agreement, the card issuer agrees to transfer funds to merchants in payment for goods and services received by the cardholder, and the cardholder agrees to repay the card issuer. The terms of the agreement also provide that the card issuer may impose various charges against the credit card account. For instance, cardholders are generally charged interest on their account balances. Cardholders may also be charged annual fees, as well as charges for late payments, returned checks, exceeding the stated limit on the credit card account, and the like. Credit card accounts are generally priced by establishing the amounts of the various fees, interest and other charges at levels that enable the card issuer to profit from providing the credit card account.
Account pricing has been implemented by defining a “pricing method” for each of the applicable fees, interest, and other charges. A pricing method establishes values for parameters that control the computation of a particular charge. For instance, an interest rate method might include parameters defining how to compute a balance (e.g., whether to compute it daily or monthly, what types of transactions to include) and a parameter establishing the value of the interest rate (e.g., a 15% annual percentage rate (APR)). A minimum payment method might include parameters establishing that the payment amount is equal to the larger of a dollar amount (e.g., $20) and a percentage of the outstanding balance (e.g., 2%). When the cardholder is billed, the pricing methods are used to control computation of the charges imposed by the card issuer. For instance, when the finance charge is determined, the computation of the account balance and the amount of interest to charge are controlled by parameters set by the interest rate method. When the minimum payment is computed, parameters of the minimum payment method are used to control the computation.
In addition to pricing, other methods may be defined to establish parameter values governing other aspects of cardholder account processing. For example, a statement-production method may be provided that sets parameters governing the type of paper to be used and the information to be included on statements sent to cardholders. In another example, methods may also be defined to establish parameter values related to incentive or rewards programs, such as frequent flier miles or rebates awarded based on purchasing activity. A rewards method typically sets parameter values for computing rewards points earned for various transactions (e.g., one rewards point for each dollar spent in a purchase transaction), and so on. In short, an “account processing method” (or “processing method”) may be provided for any aspect of cardholder account processing that is amenable to control via parameter values.
A pricing “strategy” is established by defining a pricing method for each charge that could be imposed. For instance, one pricing strategy may include a first method establishing an interest rate of 15% (APR) computed on a daily balance, a second method establishing a minimum payment amount of $20 or 2% of the account balance, a third method establishing a late payment charge of $30, and so on. The pricing strategy may be expanded into a processing strategy by including additional methods not related to charges, such as statement production or rewards methods. Thus, a typical processing strategy includes about 45 methods.
Many card issuers provide different types of card accounts with different terms and conditions, different rewards programs, and so on. These account types are generally implemented by defining multiple co-existing processing strategies, and assigning each account to one of the strategies. For instance, a card issuer may define a “classic” strategy, a “gold” strategy, and a “platinum” strategy, with the classic strategy including an interest rate of 18% and an annual fee of $20, the gold strategy including an interest rate of 16% and an annual fee of $25, and the platinum strategy including an interest rate of 15% and an annual fee of $50. The ability to assign individual cardholders to one of several co-existing strategies allows the card issuer to coordinate account pricing and other aspects of account processing with cardholder behavior to some extent.
Further coordination of account pricing and processing with cardholder behavior is desirable. For instance, a card issuer may desire to impose penalty pricing on individual cardholders who violate the terms and conditions of the cardholder agreement, e.g., by increasing the interest rate for cardholders who are delinquent in paying. As another example, a card issuer may desire to offer incentive pricing, such as a temporary reduction in the interest rate, in order to attract new cardholders or to encourage existing cardholders to increase their use of the issuer's cards. Such penalty or incentive pricing typically involves adjusting a small number of parameters within one or two account processing methods for the accounts of cardholders who qualify for the penalty or incentive.
Existing systems provide only limited ability to make such adjustments within an account processing method. In some systems, each account is assigned a processing strategy (e.g., “classic,” “gold,” or “platinum”), and the processing for all accounts assigned to that strategy is determined by the account processing methods that make up the assigned strategy. In such a system, adjusting a single processing parameter requires the card issuer to define a new strategy that differs from the old strategy in one account processing method. The card issuer must then identify the accounts to which the change should be applied and reassign those accounts to the new strategy. Subsequent changes intended to affect all cardholders must be made separately for each strategy, making this approach burdensome and inefficient.
Other existing systems allow the card issuer to override one or more of the processing parameters for an individual account by applying a method override that changes the value of one or more of the parameters of an account processing method. For instance, a penalty interest rate may be imposed by applying a method override to an account that changes the rate to a higher value but otherwise leaves the interest rate method unchanged. However, these systems provide limited functionality for identifying accounts to which a method override is to be applied. Generally, the card issuer must search account records to generate a list of qualifying accounts. Once the accounts are identified, applying a method override generally involves manually updating each account record. Subsequently removing the method override (to restore the default account processing method) involves a second manual update.
Hence, systems and methods for automatically adjusting individual price terms for a cardholder account would be desirable.